India's $220 Billion Chemical Industry Hamstrung by Compliance Burden

New Delhi, Jun 13 (KNN) India's USD 220 billion chemical industry, a major employment generator and export earner, is being severely hindered by an excessive regulatory compliance burden, particularly for micro, small and medium enterprises (MSMEs), according to industry experts.

Each unit in the sector is required to meet an estimated 635 compliance requirements per month spanning areas like factories, health, explosives, hazardous materials and food safety regulations.

Navigating this complex web of rules is proving extremely challenging for most MSMEs due to a lack of training and skilled manpower.

"Even understanding the compliance needs is difficult for most MSMEs," said Rishi Agrawal, CEO of compliance solutions firm TeamLease RegTech. "Lack of training and skilled manpower makes it more challenging."

Exacerbating the problem is the frequent revision of regulatory norms by authorities, with 200 compliance changes made in just the last week, 700 in the prior month, and around 1,963 in the current quarter, Agrawal noted.

While larger players can leverage dedicated in-house teams, MSMEs face immense difficulty staying compliant. "It may be relatively easy for big players...but for MSMEs, it really is a big challenge," Agrawal stated.

Industry representatives are calling for reforms to streamline the compliance process. Jaimin Vasa, chairman of the Gujarat Chemical Association, advocated for "industry-specific generalised licensing, instead of different ones for regulations under the Factories Act and for health, explosives, hazardous materials, food etc."

Variations in compliance across states have added another layer of complexity for companies operating in multiple locations. Vasa urged the government to "help the units comply by making the application process simple and clearances faster."

Agrawal identified rent-seeking behaviour around licenses and registrations as a major impediment that could potentially be addressed through digitalisation and a controlled environment fostering private entrepreneurship.

The Indian chemical industry accounts for 11 per cent of national exports and is projected to grow to USD 1 trillion by 2040.

It has risen from 142nd to 63rd rank in the World Bank's Ease of Doing Business index between 2014-2019. However, regulatory overhaul may be crucial for unleashing the sector's full potential.

(KNN Bureau)